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Comment: Clariden Leu – Consolidation Gets a Boost, But Who to Buy Next?

Contributing Editor, 28 April 2006

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Credit Suisse was very good at disguising what it had planned for its four independent private banks. Yesterday’s move unveiled, by Swit...

Credit Suisse was very good at disguising what it had planned for its four independent private banks.

Yesterday’s move unveiled, by Switzerland’s second largest bank, to the market of a grand scheme to create a huge private banking business outside of its own brand surprised many.

The move was not half-hearted.

When the new bank comes into existence at the beginning of next year, Clariden Leu will be Switzerland’s fifth largest bank in terms of assets – behind UBS, Julius Baer, HSBC and of course its parent, Credit Suisse.

The move ultimately bears some resemblance to last year’s UBS deal to sell its three private banks and GAM to Julius Baer – and inevitably the new unit will have Julius Baer as its biggest competitor.

But as Ray Soudah, managing director of the investment management acquisition specialist Millenium Associates said: “One (UBS/Julius Baer) was an external deal, the other is an internal one.”

Nevertheless, what both of these deals indicate is that the forces of consolidation are beginning to be move up a pace in Swiss private banking.

The methods by which this consolidation is happening may on the surface look innovative and indeed both of the deals mentioned above might have real depth to them. Yet they may not have been put together with such panache as they are often portrayed.

According to a number of reliable sources close to Credit Suisse, the Zurich-based bank had been in negotiations for a number of months to sell Clariden Bank to Basel-based Bank Sarasin – these discussions came to nothing, presumably due to pricing issues.

But if that deal had gone through, Credit Suisse would have been forced to do something – probably sell its three other independent private banks.

One suspects, although absolute proof is hard to come by, that the UBS/Julius Baer deal had not been planned for months before – or at least many other possible deals were thought of beforehand.

Clariden Leu – which incidentally sounds like it will need to be re-branded soon with a name like that – can expected to be part of the ongoing consolidation process now that it is firmly underway.

And indeed, Walter Berchtold, head of Credit Suisse private banking, said that many avenues are open to Clariden Leu, including merging with an already-listed bank.

But fewer avenues are now open for those looking for consolidation – with four private banks now effectively removed from the market.

“The sad thing for consolidation players in the Swiss market is that several attractive potential acquisition targets have been removed,” said Mr Soudah.

“This makes the sellers' famine even worse than it already was.”

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